Orwellian Ireland Home Soros and the Bank of England Implications of remaining in the Eurozone Transfer Pricing Market Mechanism

These are just a few posts gathered together from some debates on politics.ie on the necessity for Ireland to leave the Euro and devalue.

"With the Irish economy already on its knees the euro’s relative strength against sterling is a further hit to Irish competitiveness with nearly half of all exports from Irish-owned firms headed to the UK. ..... According to John Coffey at BNP Paribas says, ‘The current GBP weakness is disastrous for the Irish economy, which is already on its knees following the collapse of our property bubble & it’s ripple effect throughout the economy.’" ( http://www.finance-magazine.com/display_article.php?i=8908 )

"Has the single currency been helpful in resolving the 2008 financial crisis? Is Euro a shield for Europe against the external shock? The marcoeconoic situations in Hungary, Iceland or Belgium have shown that countries and their financial markets have been suffering from crisis no matter if they are members of the Euro zone or not." ( www.cnb.cz/m2export/sites/www.cnb.cz/en/public/ media_service/conferences/speeches/download/tomsik_20081125_new_issues.pdf )

"In this paper, we estimate the effect of currency unions on trade exploiting time series (as well as cross-sectional) variation. We use a data set that covers a large number of countries for fifty post-war years. During this sample, a large number of currency unions dissolved, allowing us to use both time series and cross-sectional variation on currency union incidence. In particular, we use the fact that over one hundred country-pairs dissolved common currency linkages during the sample." (http://www.haas.berkeley.edu/~arose/cuts.pdf p.2)

"THE INTELLIGENT use of an independent currency is the principal single reason for the Irish economic boom. The key question regarding the 'Celtic Tiger' is why did the Republic's annual rate of economic growth, which averaged 3-4 per cent a year during the 1970s and 1980s, double to 7-8 per cent in 1993-4 and remain doubled since? The principal reason is that 1993-99 was the only period in the history of the Irish state that it pursued an independent currency policy and allowed the exchange rate to float, following devaluation in 1993.The Irish economy took off on the back of the resulting highly competitive exchange rate. The punt depreciated in value from 110 pence sterling in January 1993 to 79 pence sterling at the time of the introduction of the euro. It also devalued heavily against the dollar. This boosted exports to the US and UK, our two principal markets, and reduced competitive imports from these countries.( http://www.irishdemocrat.co.uk/window-on-the-eu/euro-mistake/ )

"‘The phrase ‘benign neglect’ seems particularly appropriate as there is no doubt that the UK authorities, especially the Bank of England realised, at an early stage, that a serious downturn was on the way and that significant currency weakness might help mitigate the economic problems to come by assisting the export sector of the UK economy,’ says Ian Stannard, senior currency strategist at BNP Paribas." ( http://www.finance-magazine.com/display_article.php?i=8908 )

"Faced with a slowing economy and a widening current account deficit, the Vietnamese central bank devalued its currency, the dong, by 3% on Thursday to boost exports. Earlier, Russia devalued the rouble for the third time in a week, as the price of oil, the country’s largest export, fell sharply. Earlier this month, there was concern that the Chinese, faced with a drop in exports, may devalue the yuan after president Hu Jintao was reported in the People’s Daily newspaper as saying: “With the spread of the global financial crisis, China is losing its competitive edge in the world market as international demand is reduced.”
And finally, the US dollar index, which measures the value of the currency against a basket of currencies, has fallen to 81.21 from a peak of 88.28 on 21 November. The huge monetary and stimulus plans being unveiled in the US have led to worries over their effect on the dollar and brought back memories of the 40% devaluation of the dollar against gold during the Great Depression. These are early days, but observers have been warning about the fear of competitive devaluations as export-dependent countries try desperately to boost their economies.
....
It’s clear that the falling rupee has added to the competitiveness of Indian exports. Also, while it’s true that reports have been coming in about Chinese dumping of goods into India, the 25% depreciation of the rupee against the yuan this year will act as a cushion for domestic manufacturers. In fact, the rupee has even depreciated against the Bangladesh taka and the Sri Lankan rupee this year.
Of course, all this doesn’t affect the argument that the Chinese currency is in any case grossly undervalued and they need to revalue it upwards. And if competitive devaluations do happen, the situation could deteriorate rapidly. But so far, for Indian exporters, the weak rupee has been a help." ( http://www.livemint.com/2008/12/25221652/Fear-of-competitive-devaluatio.html )

"A survey carried out by the NCA last week on a selection of clothing, homeware, maternity/nursery and electrical goods showed that Irish consumers are being charged an average of 51% more than consumers in the UK. The survey was carried out on 21 January and looked at the prices of 44 products across 13 stores. Prices have not been adjusted to reflect the different VAT rates in ROI/UK." ( http://www.nca.ie/eng/Media_Zone/Press%20Releases/Survey_shows_prices_higher_in_Republic.html )

"ISME, the Irish Small & Medium Enterprises Association, has outlined that SME exporters to the UK are facing meltdown, as Sterling continues to dramatically weaken against the Euro. The Association outlined that 95,000 jobs were at risk as the Euro has appreciated against sterling by 16% since the beginning of the year,
A recent ISME survey confirmed,
* 47% of companies export to the UK, 65% of these outlined that it was their main export market.
* 56% are paid in Sterling and 39% in Euro.
* 40% of total SME exports go to the UK
* Two-thirds (65%) outlined that the impact of the strengthening Euro vis-à-vis Sterling is having a negative impact on their business.
* 68% are threatened by UK competitors on the domestic market, 71% on the UK market and 44% in other markets.
* 55% of SMEs are tempted to source raw materials from the UK due to the value of Sterling.
According to ISME Chief Executive, Mark Fielding, “The Situation has obviously reached crisis proportions and continues to get worse ,as Sterling is predicted to weaken further. To put the situation in perspective at present Sterling is trading at .86p against the Euro. If we were still trading in punts that equates to a rate of 1.09p sterling for every old Irish pound. Before the Euro was introduced this level of trading would have been unacceptable to the Government and would have been seen as catastrophic for exporters.

For example, 12 months ago a company selling £100 of goods into the UK would have converted the revenue into €135; the figure today has dropped to €116, a differential of €19. This drastic reduction in income means a similar reduction in net margin as UK customers cannot be persuaded to pay higher prices. The reality is that most indigenous SMEs are not in a strong bargaining position and therefore have to take a cut in margins, now placing them in a loss making situation.

The heavy reliance on the UK market in particular is a huge area of concern. Over twice as many SMEs (47%) export there in comparison to the overall Irish national exports at 17%. This exposure is a double whammy as not only are Irish firms finding it more difficult to compete in the UK market, they are also facing stiff undercutting from UK firms in the domestic and international markets.

“The pincer movement of reducing sales income, as a result of negative currency movements and increasing domestic costs, means that many exporters are walking a very narrow line between continuance and closure, with the most vulnerable being those with no offset on their raw material imports” according to Fielding.
“The strengthening Euro against Sterling presents a major challenge to the indigenous sector, particularly exporters, and will dominate business activity for the foreseeable future. With Sterling forecast to weaken even further, the full extent of the erosion of our competitiveness will become increasingly evident and in fact magnified. ( http://www.isme.ie/stg/public/download.php?site=site3008&file=08319sterling.doc )

"27% of respondents [Irish SMEs] are involved in exporting. There has been a sharp, dramatic downturn in exports with 45% of companies reporting a reduction in the value of their exports in comparison to 28% who recorded an increase. This net reduction of 17% compares very unfavourably with the last quarter where a net 4% of companies recorded a reduction. The corresponding figure last year was a net increase of 9%, confirming that there has been a twenty six percentage point turnaround in the last 12 months. Much of this turnaround can be explained by a reduction in international demand. However, there is no doubt, particularly in the last three months, that sterling’s weakness against the Euro is having a devastating impact, particularly for exporters to the UK, the majority who are SMEs." ( http://www.isme.ie/stg/public/download.php?site=site3008&file=08352trendssurvey.doc )

“National economic recovery depends on maintaining a competitive exporting sector, but the current reality is that Ireland’s traditional exporting industries including the agri-food industry are being undermined by the 20% depreciation of sterling since the end of 2007. Unless action is taken by the Government by implementing a Sterling Equalisation Fund, 13,500 jobs in exporting sectors will be lost and the recessions will be more protracted.’’

“We are looking at widespread exposure by a very wide range of export companies in both the manufacturing and services sector to the collapse of sterling. The total at risk export sales exposure of manufacturing and services companies to the UK is €7billion. At risk are 13,500 jobs in export companies. A further estimated 10,000 jobs would be indirectly affected, bringing the total to 23,500.’’

“The agri–food sector has suffered more than most in the current downturn and is now faced with an unviable exchange rate with Sterling. Across a range of exports – dairy products, beef, and mushrooms – there is severe pressure becaus of the current exchange rate.”

“In 2007 Ireland had a competitive exchange rate with sterling of £0.68 = €1. In the course of 2008, in a deliberate policy by the UK Government to gain competitive advantage, sterling fell from £0.73 against the euro at the start of the year to £0.98 at the end of the year and is now at about £0.90. At £0.90 average exchange rate to the euro in the last few weeks, €1 billion of our €3 billion of agri-food exports to the UK will be vulnerable, and 4,400 jobs are under imminent threat.’’ ( http://www.irishexporters.ie/article_1032.shtml )

Anyway we hear a lot about competitiveness in the media. No question everybody mentions it and how we will never recover till we fix it etc. Fair enough, but what percentage of our deteriorating competitiveness is caused by the disastrous fixed exchange rate we are in as opposed to domestic controllable costs? Here's the answer from Pat McArdle the chief economist at Ulster Bank:

"Arguably the most coherent contribution was made by the National Competitiveness Council in early January. They showed that we have experienced a 30% loss in competitiveness, two thirds of which reflects exchange rate movements and the remainder excess increases in our cost base." ( http://www.finfacts.ie/irishfinancenews/article_1015714.shtml )

"If we look at economic history, we see that no small country ever recovered successfully from debt deflation by cutting spending and sticking with a hard currency. The evidence from Sweden and Finland in the early 1990s is particularly instructive. Both countries suffered from the same boom-bust cycle as we did. Their banks went bust and had to be nationalised, like ours. And the initial policy reaction from everyone - the government, the trade unions, the media establishment and the senior civil servants -was that the government must reduce spending and the hard currency link to the Deutschmark must be preserved at all costs.

This adjustment failed, as ours will do, because it is intellectually incoherent unless you are prepared to entertain massive unemployment and serious social unrest. Unemployment went to 19 per cent in Finland and the budget deficit to 14 per cent of GDP. Finally, someone shouted stop to this masochistic madness.

Against all their advice, the two governments broke their currency arrangements and reflated the economy by allowing both currencies to fall. The countries recovered quickly and again, against all conventional wisdom, the competitive edge the countries garnered endured. Their banks’ capitalisation worked a treat as well.

Both countries, being small trading economies, had significant foreign debts too. Yes, these did go up, but the revenue associated with the recovery more than covered the increased debt service. Neither country suffered any long-term ramifications in terms of access to foreign capital in the future." ( http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqid=38976-qqqx=1.asp )

"The Swiss franc soared from 1.72 to 1.32 against the dollar in one of the most powerful trends I have ever seen in the global foreign exchange market. In the process, the Swiss franc has done serious damage to Switzerland's economy and bought it to the brink of deflation.
....
An overvalued currency is catastrophic for a small, open economy like Switzerland where exports are 50 per cent of GDP, two thirds of exports directed to the EU. The Swiss franc, therefore, acted as a classic transmission agent for imported deflation in Switzerland. Economic growth is almost nonexistent. Inflation has plunged. Jobless rates have soared to five year highs. Big Swiss corporate giants such as Credit Suisse, ABB, and Zurich Financial are in major financial distress. If ever an economy needed a soaring currency as badly as a dose of cancer, it was Switzerland and the Swiss franc in 2002." ( http://www.pressreleasenetwork.com/newsletter/nlfin_view.phtml?nl_id=33 )

"If the world is really following the script of the 1930s, then we are due for competitive devaluations, as nations attempt to make themselves more competitive at the expense of everyone else.
....
But the precedent of a central bank attacking its own currency is disquieting. The falls in industrial production and world trade suggest that everyone on the planet would like a cheaper currency.

This even includes China, which has allowed its currency to gain 26 per cent on a trade-weighted basis over the past four years, and seen its exports suddenly tumble." ( http://www.ft.com/cms/s/0/669f601c-0f70-11de-ba10-0000779fd2ac.html?nclick_check=1 )

"An HSBC report recently [2005] argued that not only Italy, but Germany and Holland too would be better off out of the euro. More pertinently, the financial markets are already paying less for Italian government debt than German, implying that many think the possibility of being repaid in lira rather than euros is a real one.

The whole point of currencies is to facilitate the efficient redistribution of resources. If my economy’s on the up and I am importing too much of your produce – commanding too many of your resources – then the ensuing strength of my currency allows you to earn more from your exports to me. Keep this up long enough and I lose whatever competitive advantage I had before and the balance gets redressed in your favour. Free-trading currencies are a fabulously powerful progressive force, not so much levelling the playing field as actually positively discriminating in favour of the loser of the last round.

Take this away and there’s no reason why the relatively deprived nation should be any better able to compete next year than this. Add in the free flow of other resources (like labour) and you’ll find that all those with skill, education and funds migrate to the prosperous areas, turning everywhere else into sink holes. In short, you get an exaggerated version of Britain’s long-standing North-South divide across nations." ( http://www.moneyweek.com/investments/the-euro-disaster.aspx )

"The truth is that the ECB is trying to carry out an impossible task," says Nolling. "You cannot set one interest rate for 12 very different nations - that's a problem which won't go away".
Critics dismiss Nolling's views as sour grapes: after all, monetary union stripped his beloved Bundesbank of many of its powers. "That's not the point," he replies.
"The point is that it is simply not in Germany's economic interest to allow major parts of our policy to be implemented by bodies which are not responsible for Germany."
.....[asked should the UK join:] "Why on earth would you want to join?" he asks..... "But what influence would you gain if you did?" he retorts. "Your policies would be restricted by euro zone rules. And if Germany can't get the interest rates it needs, why should the UK? You will end up being treated like Ireland or Greece - and a big country like yours deserves more."
.......[asked about Germany leaving the euro:] "It's not realistic, for now, because we're so committed politically," Nolling says. "But the whole system could eventually collapse, given the problems when one central bank has to steer an entire continent of nation states. Certainly, the more countries that join, the more ungovernable it will become," Nolling says. "In that sense, the euro was born to die." ( http://www.telegraph.co.uk/finance/2854213/'The-UK-would-be-crazy-to-join-the-euro'.html" )

"Germany’s problem, in part, is that it went into the euro at the wrong exchange rate that overvalued the deutsche mark. So you have a situation in the eurozone where Ireland has inflation and rapid expansion while Germany and France have stalled and had the difficulties of adjusting.
The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on fiat money—money tempted to inflate—put out by politically independent entities." ( http://nalert.blogspot.com/2006/02/milton-friedman-on-euro.html )

"One of my fondest memories is of Bertie Ahern at a debate at Trinity College in Dublin shortly after the pound had left the European exchange rate mechanism in September 1992; Ireland was struggling with a punt that had stayed in while the pound had devalued by some 20pc.

Mr Ahern, then finance minister, had a mantra for the evening: "I will not devalue t'e punt". Of course within a few months he had done just that. Why? Because in those days when Ireland controlled its own interest rates and currency it would have been madness to be a fifth overvalued against the country of which you are virtually a part.
.....
Of course, it is this boom that has got such admiring and naive reports from the BBC; but a hard landing cannot be far away. Its most likely form would be a collapse of the incomes policy [he says that Ireland had an 'incomes policy' via its sponsorship of high levels of immigration, which deliberately kept down wages but also boosted demand for things like housing], wage costs escalation, and spending cut-backs by investors and consumers as the Government takes emergency action - perhaps huge tax increases or a floating tax on buying punts (a backdoor floating exchange rate).

The ensuing slump will be far worse than it would have been had the boom been kept under control. Higher inflation and reinforced boom-and-slump is an unattractive recipe for UK citizens and businesses. That's the lesson of Ireland and the euro." ( http://www.btinternet.com/~patrick.minford/dt000508.html )

"This is known as the Swedish or "bad bank" model. However, as this column has pointed out in the past, there is one seismic difference between the Ireland of today and the Sweden of 1992. The Swedes underpinned their banking bailout with a huge 40pc devaluation of their currency, allowing inflation to rise and so the resulting uplift in property values was swift because it was facilitated by a new softer currency. Their "bad banks" offloaded properties in the recovery and paid back the taxpayer, at a profit, reasonably quickly.

Without the devaluation of the currency and the printing of money in Sweden, the bad bank idea might not have worked so well. In fact, the risk is that it does not work at all and we, the taxpayer, end up not only bailing out the banks but bailing out the bankers and developers; they'd be off the hook and we'd be left carrying the can. So without a devaluation to ease the pain, what can we do now to ensure that we don't end up with a bunch of toxic assets that an asset management company can't sell?" ( http://www.independent.ie/opinion/columnists/david-mcwilliams/bad-bank-plan-is-risky-business-for-taxpayer-1693198.html )

"One sawmiller believes that the drop in sterling needs to be addressed first between growers (suppliers), and customers (timber processors), and at Government level. He said: "Sterling has dropped by almost 30% in value since August 2007, which is unprecedented.

"There is very little coverage in the media on this, even though 97,000 jobs are threatened in irish businesses as a result on the drop in value of sterling, coupled with decreased demand.

"We now need co-operation between the growers and mills on price and security of supply, to help secure orders in Britain in the first quarter, as the Irish market is completely flat, and is likely to stay that way. If all this happens, we would be optimistic for the future, but action is needed immediately, he said. Direct Government intervention is unlikely. A spokesperson for Enterprise Ireland said that the re-introduction of the Market Development Fund, which provided support in the past during fluctuations in sterling, cannot be introduced. It would be in conflict with EU competition law." ( http://www.farmersjournal.ie/2008/1227/farmmanagement/forestry/index.shtml )

"The availability of credit at relatively low interest rates has been a major contributory factor to the increase in house prices, which are at historically high levels with reference to average earnings. House prices have risen by 50 per cent since 1994 and there are predictions of further substantial price rises for which evidence already exists. Home ownership is important to Irish people compared to continental Europe, where most people never aspire to owning their home and where rental of private property is the norm. This could become an issue in Ireland and there have been calls for the Central Bank to restrict credit, presumably on the understanding that this will somehow control prices. The Governor of the Central Bank has pointed out that the bank has no authority to restrict credit. In any case, such restriction would be inconsistent with the European Union. It should be made clear that given our ceding of control of monetary policy to the European Central Bank, there will be no question of our Central Bank intervening to restrict credit." ( http://historical-debates.oireachtas.ie/S/0154/S.0154.199803120006.html )."

"Ireland was a microcosm of that credit bubble in the western world. Credit was freely available. Mortgage lending terms increased, as did maximum loan-to-values. But the salient difference between Ireland and, for example, the UK and most of the euro area, was that interest rates were totally inappropriate for our circumstances. Output was above potential for most of the period. A point Taylor rule estimate shows that interest rates were inappropriately low (see Figure 6). If we still had control of them, we can only assume that they would have been four or five percentage points higher in 2003-2006 (see: "Ireland's interest rate should be 6%" Davy Weekly Book, January 21st 2005)." ( http://www.davy.ie/content/pubarticles/dotiecr20081013.pdf )

"When the euro was introduced in 1999, the key imponderable was the answer to the following question: how would the "one-size-fits-all" macroeconomic policy framework satisfy the requirements of such a diverse group of economies? Fiscal policy was still at the discretion of national governments, albeit with meaningful constraints imposed. But individual governments or monetary authorities could no longer influence exchange rates. More importantly, control of monetary policy was lost.
......
But losing control over monetary policy to Frankfurt in 1999 has had an impact on the Irish economy. Think of record housebuilding, annual credit growth running at 25%, a near doubling in house prices, and 5.5% average inflation in the service sector. While potentially storing up problems for the future, interestrate-sensitive sectors of the economy contributed handsomely to three years of above-trend growth, followed by a strong recovery from a shallow recession. All of which poses the important question: at what level would the key policy rate stand if the Central Bank of Ireland still had control over it?
....
Putting all of this together, we reckon that an appropriate policy rate for Ireland is around 6%, fully four percentage points above its actual level. There is no doubt that an inappropriate policy rate for Ireland is fuelling the booming residential construction sector. One way to think about it is to imagine the mayhem that would ensue were interest rates to rise to 6%. Our worry is that an elongated boom could lead to a more severe correction in the housing market when rates finally begin their ascent (to 3% rather than 6%) or when sentiment changes. A return to higher inflation rates may also occur. Private-sector credit is growing at 26% year on year while services and construction wage inflation is back up to 7%. We may well have to rely on another tool beyond our control to keep inflation in check—further appreciation of the currency." ( http://www.davy.ie/content/pubarticles/wmccr20050124.pdf )

"I said I was prepared to hold the line until the end of the year. That has now passed. If the system does not correct itself . . . the pressures on industry are something that cannot be lived with indefinitely.’’( http://www.centralbank.ie/data/site/spring8.pdf )

"A law firm's office on a quiet downtown street here houses an obscure subsidiary of Microsoft Corp. that helps the computer giant shave at least $500 million from its annual tax bill. The four-year-old subsidiary, Round Island One Ltd., has a thin roster of employees but controls more than $16 billion in Microsoft assets. Virtually unknown in Ireland, on paper it has quickly become one of the country's biggest companies, with gross profits of nearly $9 billion in 2004." ( http://faculty.law.wayne.edu/mcintyre/text/in_the_news/WSJ.com%20-%20Irish%20Subsidiary%20Lets%20Microsoft%20Slash%20Taxes%20in%20U.S.pdf )

"As against all this, it is often noted that the UK’s share in Ireland’s exports has been in decline for decades and is now below 30%. But this misses two important points. First, it is not just exporters who face competition from the UK. Proximity, a shared language and, in recent years, deregulation driven by the Single Market have made Ireland a natural target for UK firms in all sectors, including some traditionally thought of as non-traded. Second, the firms responsible for the growth in Ireland’s exports to continental Europe, many of them in high-technology sectors such as chemicals and computers, are disproportionately foreign-owned, high-margin and capital-intensive. This makes them much less vulnerable to exchange-rate fluctuations than Irish-owned firms. For both these reasons the exposure of Irish GNP and employment levels to sterling is greater than the UK share of exports would suggest. There is a real danger that a sterling depreciation relative to the euro could cause irreversible damage to the indigenous sector and knock stripes off the Celtic Tiger." ( http://www.economics.ox.ac.uk/members/peter.neary/writings/ios97.pdf )

"Comparisons with Finland and Sweden from 1990 to 1993 are fanciful. The Finns suffered an economic contraction of 11% in a short period and saw unemployment rates rise from 3% to 18% over two years. The subsequent rebirth of their economy, however, was based on a very significant currency devaluation of the free-floating Finnish markka and on the fact that its exporters were selling into relatively buoyant markets. ... Similarly, the recovery of the Swedish economy was export-led and grounded on a sharp downward adjustment of the value of the Swedish krona. .... As things stand in Ireland, nobody is prepared to question our continued membership of the eurozone, which is itself seen as vital to some sort of ultimate recovery and the ongoing "stability" of our financial system, whatever that means. ... Our exporters are operating in troubled markets, trading in a hard currency and propping up a very expensive public sector. The policy implications for Ireland are obvious, but that would involve a sea-change in attitudes and the embracing of what is now considered a heresy - in short, a downward currency adjustment, just like they are having in Britain and America." (Sunday Times Business 3rd May 2009, p.4)

"Joining EMU gave Ireland artificially low interest rates more appropriate to the German economy. The result was a boom in credit, a bubble in house prices and almost a doubling in annual employment growth with a focus on the interest-sensitive sectors of our economy such as construction and financial services. One can see the impact of EMU membership by simply looking at charts that graph Ireland’s house prices and total numbers employed since 1980. Ireland experienced steady, if unexciting, growth from 1980 to the mid1990s.But in the mid 1990s house price and employment growth changed trajectory and accelerated sharply upwards. The cause was the decision (and its anticipation by interest rate markets), on May 3,1998, at the European Council in Brussels, that Ireland would participate in the third stage of EMU. The clearest consequence of the decade of unprecedented monetary stimulation since then was a bloated construction sector. By the middle of this decade, over 20 per cent of all males at work in Ireland were employed in the construction sector. The price/earnings ratio of houses in some parts of Dublin (using rental income as a measure of potential earnings) approached 100. .... The fundamental problem, however, is that EMU gives us interest rates inappropriate to our circumstances. It is driving us to follow binge eating with crash dieting. Those who argue that it is good that we are in EMU as it shields us in our current economic crisis miss the point. It was too-low EMU interest rates that got us into this crisis in the first place. Sadly, it is too-high EMU interest rates that will keep us in it for some time to come. The conceit of EMU is that by joining it, exchange-rate volatility simply disappears. But the volatility associated with exchange-rate movement doesn’t disappear - it just takes another form. With currency flexibility gone, the burden of economic adjustment falls upon employment levels and property prices. Having seen both dramatically outperform our international peers over the decade 1997-2007, we risk seeing them dramatically underperform from 2007-2017." ( http://archives.tcm.ie/businesspost/2009/03/29/story40622.asp )

"Currency of crisis It is running a very close second to the banking crisis in terms of economic impact, but little attention is being focused on the full-blown and ongoing currency crisis. The Irish economy is living through just the apocalyptic nightmare euroscptics predicted when we joined the single currency. What has the euro ever done for us? Unquestionably, it helped to fuel the property bubble as interest rates were set in Frankfurt at rates inappropriate for our hot-house economy. The single biggest factor in the creation of the Irish property collapse was interst rates that ran substantially below the rate of inflation. Free money. The painful lesson here is t hat our own central bank did not do enough to curb the access to this cheap credit that was being created in Frankfurt. In future, this can be prevented. The more intractable issue is trade. Britain is, and always will be, our largest trading partner. It is a market of 60m people on our doorstep. For exporters, the currency differential with sterling seeps into every cost item, exacerbatring a loss of competitiveness on wages, energy and waste disposal. Imports are conceivably a bigger problem, just ask any supplier to Tesco. It is not just food. More second-hand imported cars, largely from Britain and Northern Ireland, will be sold in the Republic this year than new cars. In april alone, 6,000 imports were sold. Of course, the problem is not our membership of the euro but Britain's abscence from it. But it is a problem that is very real, for which there is no easy solution and which cannot be ignored. If sterling remains weak, the International Monetary Fund may yet still turn up on our doorsteps." (Sunday Times Business Section 17 May 2009, p.2.)

"Small open economies that have suffered property crashes and associated economic and financial crises have almost always relied on devaluations of their currencies to bring about recovery. Devaluations boost exports and reduce imports by helping to restore lost competitiveness. ... As members of the European single currency area, devaluation is not an option. So our economic recovery depends on the Government's ability to engineer a devaluation of sorts by cutting wages across the economy. This is necessarily a more clumsy process than letting the currency drop." (Sunday Independent 15 Feb 2009 Business Supplement, p.2.)

"The right thing to do is to devalue, but that is impossible." (Irish Independent 26 Feb 2009, Business Section p.7)

"A depreciation of 40% in the value of the Finnish currency got it out of its great recession in the 1990s, but the process was extremely painful, a conference organised by the Economic and Social Research Institute (ESRI) will hear today. ..... [goes on to describe the Finnish situtaion then, 70% fall in stock market, 50% fall in house prices etc] .... The crisis eased after the abandonment of fixed exchange rate policy. The Finnish markka depreciated initially by 40%. This combined with a shakeout of unproductive businesses, led to dramatic improvements in competitiveness," Mr Kiander says. Mr Kiander notes that the currency devaluation which solved the Finnish crisis is not available to eurozone members. "For countries within the eurozone, deflation appears to be the only viable alternative, but the adjustment process is slow and painful," he says." (Irish Independent Business 30th of April 2009, p.3.)

"A road-map for EMU breakup Membership of EMU was supposed to be a one-way street, with no option to leave. But, as history shows,....... [The point of view of some EMU members:] Why not? Interest rates are rising, exchange rate and monetary policy are unavailable and fiscal policy is constrained. The grass might indeed be greener on the other side of the fence. ...... Markets cannot force a country to leave the euro. But what they can do, and what the current crisis is showing is already happening, is that they can make it very uncomfortable for a country to remain in monetary union. ..... Is it possible to leave EMU? In a word, yes." ( http://www.lombardstreetresearch.com/ and http://synonblog.dailymail.co.uk/ )

"Below are the spreads of long-term interest rates in Britain and Spain against Germany. Britain has, despite worries about its budget, managed to cut rates significantly vis-a-vis the core eurozone countries (0.6 percent on long term rates is fairly big.) In addition, the fall in the pound has made British products a lot more competitive. I think the Spanish comparison is instructive. Like Britain, it’s had a major housing bust. But Spain has basically had nothing happen to offset that shock. So I’m actually fairly hopeful about Britain; right now, the fact that it’s not on the euro is serving it well." ( krugman.blogs.nytimes.com/2009/04/24/a-quick-note-on-britain/ )

"The weakness of sterling will wipe 150m euro off the value of Irish beef sales to Britain this year., Meat Industry Ireland (MII) has predicted. The processor representative body said the drop in sterling's value relative to the euro was costing the equivalient of 45c/kg, or 153 euro/hd, on a 340kg steer." (ibid p.5)

"Increasing milk output will only make you go bust faster." (Irish Independent Farming Supplement 28 April 2009 p.1, 5.)

they are not the only people doing this,, the RTE GUIDE is printed in england so is all DISCOVER IRELAND printing and all big government contracts are printed in portugal and spain i know this because im a printer by trade and am working a 3 day week like most of the industry, people are losing their jobs in the hundreds week after week because of the amount of work going abroad its a national disgrace ( http://www.politics.ie/economy/64878-dundalk-chamber-commerce-goes-up-north-printing.html )

"Companies are folding or contracting on huge levels. We lost out on the ballot papers which we printed for years to a UK company. I know others have lost out on things from political parties. It sticks in my throat to say it, but SF are the only political party I know getting their stuff printed locally. FF down this way have gone abroad. I don't know about the rest but i don't know any other printer in our area who is printing material for any political party. I vomited when I heard Lenihan using the word "patriotic" and "unpatriotic" but then the guy has the gall to head to that very country for his printing when people down here are facing the dole queues. Lets not kid ourselves, could you imagine what would happen if it were found out that London sent any government printing to France or Germany??? Heads would be rolling. We seem to put up with stuff that other countries wouldn't. Our politicans have no feeling of responsibility to us, they don't really answer to us. They just have to worry about themselves and theirs. Our prices are cut to bare minimium, we cover only wages and materials and are still being beaten on prices and loosing customers to companies outside the state. The government may have to tender EU wide but they can very easily create stipulations that make it impossible to do certain printing abroad. When I heard that all the Junior and Leaving Cert papers are printed abroad it made me sick." ( http://www.politics.ie/economy/64878-dundalk-chamber-commerce-goes-up-north-printing-3.html )

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Soros and the Bank of England

Implications of staying in the Eurozone

Transfer Pricing

Market Mechanism